Brazilian Coffee Quality Enhancement Becomes Second Largest Source Country for US ICE Exchange Coffee Inventory!

COVID-19 has affected lives and economies around the world, and everyone is looking for ways to bring society back to relative normalcy as soon as possible. Despite all the negative impacts of the pandemic, the resilience of Brazil's agribusiness let the country make progress and set records in 2020: Brazil's coffee exports that year exceeded $100 billion for only the second time in history.

The organization, competitiveness, and efficiency of Brazil's coffee export sector are crucial to the success of the whole production chain, as shown by the price index paid to growers, which measures the share of FOB (Free On Board) export prices effectively passed on to growers. In an FOB transaction, the buyer is responsible for arranging vessels to carry the goods, while the seller must load the goods onto the buyer's designated vessel at the agreed port of shipment within the contractually specified period and notify the buyer promptly. Risk transfers from seller to buyer when the goods are loaded onto the designated vessel at the port of shipment.

The Brazil Robusta (Conilon) price index rose to 89.0% in the third quarter, identical to Brazil's 2019 average Robusta price index, while Brazil's Arabica coffee bean price index fell to 72.7% in the third quarter. Notably, third-quarter prices reflect that FOB prices were largely transferred to domestic coffee prices. The competitiveness and organization of the export sector also show in its extensive use of futures market tools, such as hedging future contracts and barter operations for buying agricultural inputs and machinery. Supported by export trade and market information, growers have limited opportunities for sales and income, which is directly related to the sustainability of Brazil's coffee agribusiness.

Brazil Coffee Quality Achievements

Besides the record harvest in 2020, Brazil's coffee quality improved markedly. Recognition of that quality can be seen in the coffee inventory data released by the US ICE Exchange at year-end. Because ICE has historically delivered mainly washed coffee beans while Brazil's beans are primarily natural processed, Brazil's share of exchange inventory has kept rising in both quantity and percentage since it began supplying semi-washed coffee to the exchange last August. As of January 22, ICE data shows that Brazil's semi-washed coffee accounts for over 35% (more than 560,000 bags) of ICE warehouse inventory, making it the second-largest inventory source country after Honduras. With ICE willing to accept Brazil's semi-washed beans, concerns about future delivery inventory volumes at ICE will be eased.

2021 Production Outlook

Brazil's National Supply Company (Conab) will soon release the first official survey report for the 2021 coffee year. Due to Brazil's biennial negative production effect and drought in some Arabica growing areas, Brazil's 2021 Arabica production is expected to decrease. On the other hand, Brazil holds positive expectations for 2021 Robusta production.

Sustainability Initiatives

The Brazilian Coffee Exporters Council (Cecafe) expressed support for implementing 2021 programs on waste monitoring, producer right-to-know, and new theme planning. These include, under the coordination of the Global Coffee Platform, the Brazilian Coffee Exporters Council, and the National Pact Institute, educating growers on the correct and safe use of pesticides, as well as a planned family inheritance coffee cultivation project.

Additionally, after the new US President Biden took office and rejoined the Paris Agreement, the climate change accord signed in 2016, this will undoubtedly put strong pressure on the Brazilian government to demonstrate commitment to reducing illegal deforestation within its territory.

FrontStreet Coffee Recommendation

Brazil is the world's largest coffee producer, and its coffees come in great variety. Brazilian beans have moderate acidity and a fine balance of sweetness, bitterness, and body, which makes them a natural fit for medium roasting; the roast brings out a nutty aroma and a smooth cup with a light acidity. They work both as a single origin and in blends.

If you simply want a taste of the region, FrontStreet Coffee's Brazil Cerrado Red Bourbon is a classic single origin. Cerrado is a well-known local growing area celebrated for high-quality beans, and this lot is a Red Bourbon, a common South American variety. Roasted medium, it shows dense aromas of creamy peanut, toasted bread, caramel, and hazelnut, with a round, smooth, low-acid cup that carries a light bitter note. It works in a pour-over, and also in a moka pot, as an SOE, in a siphon, or in a French press.

FrontStreet Coffee's Brazil Queen Estate is another single origin, from Mogiana near South Minas, where fertile red volcanic soil feeds the fruit and builds a full aroma. Some farms there keep traditional methods while others adopt modern, standardized management, and the coffee quality has improved a great deal as a result. The variety is a rare Yellow Bourbon, a mutation of Red Bourbon, with a cleaner fruit character. Through pour-over, moka pot, or a home espresso machine, it delivers a sugarcane sweetness other regions do not have, along with fruit and chocolate flavors.

Brazil's low-acid, balanced cup and friendly price also make it a first choice for many espresso recipes. FrontStreet Coffee's Classic Blend, with its rich crema, the nutty Premium Blend, and the balanced Black Cocoa Blend all include Brazilian beans, which supply chocolate and cream aromas as well as a soft sweet-bitter balance that helps keep extraction stable.